MONEY retirement planning

The Proven Way to Retire Richer

Looking for more money for your retirement? Who isn't? This study reveals that there is one sure-fire way to get it.

Last June, the National Bureau of Economic Research with professors from the University of Pennsylvania, George Washington University, and North Carolina State University, released a study entitled “Financial Knowledge and 401(k) Investment Performance”.

In it the authors found that individuals who had the most financial knowledge — as measured through five questions about personal finance principles — had investment returns that were on average 1.3% higher annually — 9.5% versus 8.2% — than those who had the least financial knowledge.

While this difference may not sound consequential, the authors noted that it “is a substantial difference, enhancing the retirement nest egg of the most knowledgeable by 25% over a 30-year work life.”

Yes, knowing the answers to five questions had a direct correlation to having 25% more money when you retire.

So what are those questions? For example, and for the sake of brevity, here are the first three:

Interest Rate: Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow?

Answers: More than $110, Exactly $110, Less than $110.

Inflation: Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, how much would you be able to buy with the money in this account?

Answers: More than today, Exactly the same, Less than today.

Risk: Is this statement True or False? Buying a single company’s stock usually provides a safer return than a stock mutual fund.

While the questions aren’t complex, they’re tough. And few people can answer all three correctly (with the answers being: More than $110, Less Than Today, and False).

So what did those people who were able to answer those questions most accurately actually do to generate the highest returns? The authors found one of the biggest reasons was that the most financially literate had the greatest propensity to hold stocks (66% of their portfolio was in equity versus 49% for those who scored lowest). And while their portfolios were more volatile, over time, they had the best results.

This is critical because it underscores the utter importance of understanding asset allocation. This measures how much of your retirement savings should be put in stocks relative to bonds. A general guideline is the “Rule of 100,” which suggests your allocation of stocks to bonds should be 100 minus your age. So, a 25-year-old should have 75% of their retirement savings in stocks.

Some have suggested that rule should be revised to the rule of 110 or 120 — and my gut reaction is 110 sounds about right — but you get the general idea.

This vital distinction is important because over the long-term stocks outlandishly outperform bonds. If you’d invested $100 in both stocks and bonds in 1928, your $100 in bonds would be worth roughly $7,000 at the end of 2014. But that $100 investment in stocks would be worth more than 40 times more, at $290,000, as shown below:

Of course, between the end of 2007 and 2008, the stock investment fell from $178,000 to $113,000, whereas the bonds grew from $5,000 to $6,000, displaying why someone who needs the money sooner rather than later should stick to bonds. But a 40-year-old who won’t retire for another 20 (or more) years can weather that storm.

Whether it’s $100 or $1,000,000, watching an investment fall by nearly 40% in value is gut wrenching. But in investing, and in life, patience is key, and as Warren Buffett once said, “The stock market serves as a relocation center at which money is moved from the active to the patient.”

While everyone’s personal circumstances are different (my risk tolerance is vastly greater now than it will be in 30 years) knowing that you can be comfortable allocating a sizable amount of your retirement savings to stocks will yield dramatically better results over time.

TIME Innovation

Five Best Ideas of the Day: February 20

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

1. Hollywood’s diversity problem goes beyond “Selma.” Asian and Latino stories and faces are missing.

By Jose Antonio Vargas and Janet Yang in the Los Angeles Times

2. Shifting the narrative away from religion is key to defeating ISIS.

By Dean Obeidallah in the Daily Beast

3. Innovation alone won’t fix social problems.

By Amanda Moore McBride and Eric Mlyn in the Chronicle of Higher Education

4. When the Ebola epidemic closed schools in Sierra Leone, radio stepped in to fill the void.

By Linda Poon at National Public Radio

5. The racial wealth gap we hardly talk about? Retirement.

By Jonnelle Marte in the Washington Post

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

MONEY IRAs

This Innovative Idea Could Improve Your Retirement

State governments are starting to step in to help workers save. Here's why that's a good thing.

A rare innovation in retirement saving is taking shape right now in, of all places, Illinois. In January the state became the first to okay an automatic IRA for workers at certain small businesses that don’t offer retirement plans. Those companies will be required to funnel 3% of their employees’ paychecks into a state-run Roth IRA, though workers can opt out.

It may seem surprising that Illinois is breaking ground in this area—after all, the state’s pension plans are among the worst funded in the nation. But Illinois is actually part of a broad movement. Some 30 states, including California and Connecticut, are developing similar savings programs. Says Sarah Mysiewicz Gill, senior legislative representative at AARP: “We’re reaching a critical mass of states.”

A Local Approach

Why are states taking on retirement planning? Half of private-sector employees don’t have an employer plan—a crucial tool for building a nest egg. In fact, just having access to a retirement plan through work makes a huge difference in whether you save. While 90% of those with a workplace plan have put aside money for retirement, only 20% of those without one have, according to the Employee Benefit Research Institute.

So states will face a huge drain on their budgets as workers with no savings reach retirement and need services such as Medicaid and food assistance. “If Washington were moving faster on this, the states wouldn’t have to,” says Illinois state senator Daniel Biss, who sponsored the new IRA.

No question, Congress has long dodged addressing the looming retirement crisis; it has failed to fix Social Security or create a federal automatic IRA, which President Obama proposed again in his most recent State of the Union address. Obama did introduce the myRA last year, which will allow savers without employer plans to put away as much as $15,000 in Treasury securities. But without auto-enrollment, the myRA’s effectiveness will be limited.

The Illinois program may prove to be an appealing prototype. (First it will need approval by the Department of Labor and IRS.) Still, each state is crafting its own version. In Connecticut, the automatic IRA may be paid out as a lifetime annuity or in a lump sum. Indiana is looking at setting up a voluntary plan with a tax credit. “States are a great laboratory for experimentation,” says Kathleen Kennedy Townsend, founder of Georgetown University’s Center for Retirement Initiatives.

Reason to Hope

Of course, it’s far from certain that state savings plans will make much headway: at 3%, Illinois’s minimum contribution is far below the 10% to 15% of pay that retirement experts generally recommend. And a hodgepodge of state IRAs would be less efficient and more costly than a national plan.

That said, states can sometimes get it right. State-run 529 college savings plans have helped countless families with tuition bills. The Massachusetts health care plan was a model for the national plan that has meant coverage for millions. Perhaps the states’ efforts will push retirement savings higher up the federal government’s priority list. If Illinois can lead the way on retirement, anything’s possible.

 

TIME celebrities

Here’s What Jon Stewart Wants From the Next Host of The Daily Show

"Rosewater" New York Premiere
Desiree Navarro—WireImage/Getty Images Director/writer/producer Jon Stewart attends "Rosewater" New York Premiere at AMC Lincoln Square Theater on November 12, 2014 in New York City.

He still didn't say who he thinks that host should be, though

After hosting The Daily Show for a decade and a half until recently announcing that he will step down at the end of the current season, comedian Jon Stewart wants his successor — whoever that may be — to take the show’s concept to the next level.

Stewart, speaking at Catie Lazarus’s show “Employee of the Month” at a New York pub, wouldn’t name a desired successor but explained what he would like to see from the show after he leaves, the Hollywood Reporter reported.

“What I want to see there is the next iteration of this idea,” Stewart said, adding that he used every possible permutation of the show’s concept. “I feel like the tributaries of my brain combined with the rigidity of the format.”

He used The Daily Show alum and Last Week Tonight host John Oliver (who will definitely not be succeeding Stewart) as an example of the possibilities. “John Oliver was able to apply our process to a more considered thing, and it’s exciting to watch it evolve and see it mutate and change and fill different gaps and different ideas,” he said. “That’s the part that I’m looking forward to seeing.”

As for his own plans, Stewart reiterated that he has a lot of “ideas” of his own, and that spending more time with his family is a big part of his decision to step down.

MONEY Lifestyle

The Most Surprising Thing That Will Make You Happy in Retirement

FIFTY SHADES OF GREY, l-r: Dakota Johnson, Jamie Dornan, 2015.
Chuck Zlotnick—Focus Features/courtesy Everett Collection

While financial security is important, a little sex goes a long way toward increasing happiness in retirement.

Most retirees probably aren’t as “frisky,” shall we say, as Christian Grey in the new film Fifty Shades of Grey. But new research shows that many people well into their 70s and 80s still have active sex lives, some engaging in sex at least twice a month. Tame perhaps, by Mr. Christian’s standards. But more than enough to make for a happier retirement.

We all know that diligent financial planning can lead to a more satisfying post-career life. But while money is important to retirees—especially guaranteed income they know they won’t outlive—financial security alone doesn’t assure well-being in retirement. A number of non-financial factors may also be able to increase your chances of having a more meaningful and joyful retirement, including having more sex.

A paper published last year in the Journals of Gerontology found that older married couples who had sex more frequently had higher levels of marital happiness than couples who had sex less often or had no sex at all. Which wasn’t exactly a revelation, since an earlier study (“Sex and Older Americans: Exploring the Relationship Between Frequency of Sexual Activity and Happiness”) that focused on people 65 and older, both single and married, also showed a relationship between happiness and frequency of sex, even after adjusting for health and finances.

To get this boost in happiness, the sex didn’t have to be the push-the-envelope variety portrayed in the Fifty Shades movie. Indeed, both studies set the parameters of sexual activity pretty broadly, with the Journals of Gerontology research defining sex as any activity with a partner that was sexually arousing.

But frequency does matter. In the Sex and Older Americans study, for example, only 32% of those who said they’d experienced no sexual activity during the prior 12 months felt very happy with life overall. By contrast, almost 38% who had sex at least once or twice over the previous 12 months reported that they were very happy, while more than half who had engaged in sex more than once a month reported being very happy.

I’m not suggesting that anyone should base their sex habits on these or any other studies. For one thing, it’s possible that frequency of sex isn’t what’s driving happiness. It could be the other way around. Happier people may just have more sex. Besides, how often one has sex or whether one chooses to have it at all is a highly personal matter, and thus a decision each person has to make based on his or her particular circumstances.

That said, intimacy and sex are an integral part of life. So it only makes sense for retirees to consider whether their current sex habits are contributing to a more meaningful and fulfilling life—and if not, whether this is an issue that deserves more attention.

Of course, there are plenty of other lifestyle moves that also have the potential to increase your sense of well-being in retirement. Research shows that people who cultivate a circle of friends they can rely on for companionship and support tend to be happier than those who have fewer ties with friends or family members. Similarly, staying active through occasional work or volunteering can make for a more satisfying retirement, as long as you don’t go too far and effectively turn an avocation into a job. And people who attend religious services also tend to be happier than those who don’t.

So as you’re mapping out your post-career life, by all means give financial issues all the attention they deserve. Make sure you’re saving enough, that you’re investing wisely and have a coherent retirement income plan. But do some retirement lifestyle planning as well, and make your sex life a part of it. As to how big a part, well, that’s entirely up to you.

Walter Updegrave is the editor of RealDealRetirement.com. If you have a question on retirement or investing that you would like Walter to answer online, send it to him at walter@realdealretirement.com.

More From RealDealRetirement.com

Your 3 Biggest Social Security Questions Answered

Can You Afford To Retire Early?

Should You Pull Your Money Out of Stocks Or Let It Ride?

MONEY Saving & Budgeting

4 Ways to Hit Your Money Goals

150218_FIT_MOTIVATION
Gregory Reid

It's one thing to know that you need to save more money, find a better job, or pay down debt. It's another thing to actually do it. Employ these strategies to stay on track.

Welcome to Day 2 of MONEY’s 10-day Financial Fitness program. Yesterday, you did a self-assessment to see what kind of financial shape you’re in. Today, we help you find the motivation to take your finances to the next level.

Okay, you’ve checked your vitals, and you’re probably feeling pretty good about your starting point. According to Gallup’s annual Personal Financial Situation survey, 56% of people in households earning $75,000 or more say they are better off financially now than they were a year ago, up from 44% who felt that way in January 2014.

But just as even the most devoted gym-goer can get complacent, your financial confidence could stop you from reaching the next level. “In good economic times people save less and spend more,” says Dan Geller, a behavioral finance expert and the author of Money Anxiety. Keep the eye of the tiger even when you’re doing great. Here’s how.

1. Make a Specific Goal

When you show up at the gym without a plan, there’s a good chance you’ll shuffle on the treadmill for a half-hour and call it a day. Your financial life is no different. To boost your performance, start by zeroing in on a goal. A study by Gail Matthews, a psychology professor at Dominican University, found that you’re 42% more likely to achieve your aims just by writing them down. Indeed, people with a written financial plan save more than twice as much as those without a plan, says a Wells Fargo survey. The more specific the goal, the easier it is to tackle. Rather than plan to “cut costs,” focus on, say, paying off your mortgage five years early.

2. Buddy Up

Much as a workout partner provides motivation to get to the gym, recruiting a family member or friend to hold you accountable is a good way to stay on track. In another study by Matthews, some participants shared their goals with a friend via weekly updates—achieving their aims 33% more often than those who did not.

3. Get a Nudge

Sometimes you just need a reminder. A study by the Center for Retirement Research found that bank account holders who got reminders about their savings goals put away more cash than people who didn’t. It’s easy to set recurring calendar reminders on your PC or phone, or try a service like FollowUpThen.com, which lets you schedule emails to your future self.

4. Stickk It

Need something with more teeth? The website Stickk.com allows you to pledge a sum of money toward a goal, sign a commitment contract, and pick a friend to monitor your progress. Achieve your aim, and you get the money back. Miss it, and you lose the money, which is donated to charity or a friend.

Previous:

Next:

MONEY retirement planning

What Women Can Do to Increase their Retirement Confidence

150212_FF_WOMENDONTTALK
Izabela Habur—Getty Images

Knowing how much to save and how to invest can help women feel more secure. Here's a cheat sheet.

Half of women report feeling worried about having enough money to last through retirement, according to a new survey from Fidelity Investments of 1,542 women with retirement plans.

Those anxieties aren’t necessarily misplaced either.

Women have longer projected lifespans than men and even if married, are likely to spend at least a portion of their older years alone due to widowhood.

“So they need larger pots of money to ensure they won’t outlive their savings,” says Kathy Murphy, president of personal investing at Fidelity.

Earlier research by the company found that while women save more on average for retirement (socking away an average 8.3% of their salary in 401(k)s vs. 7.9% for men) they typically earn two-thirds of what men do and thus have smaller retirement account balances ($63,700 versus $95,800 for men).

Also, while women are more disciplined long term investors who are less likely than men to time the market, women are also more reluctant to take risk with their portfolios, says Murphy.

“And if you invest too conservatively for your age and your time horizon, that money isn’t working hard enough for you,” she adds.

How Women Can Increase their Confidence

Financial education can help women reduce the confidence gap, and get to the finish line better prepared, says Murphy.

According to the Fidelity survey, some 92% of women say they want to learn more about financial planning. And there’s a lot you can do for free to educate yourself, notes Murphy. As an example, she notes that many employers now offer investing webinars and workshops for 401(k) participants.

You might also start by reading Money’s Ultimate Guide to Retirement for the least you need to know about retirement planning, in digestible chunks of plain English. In particular, you might check out the piece on figuring out the right mix of stocks and bonds, to help you determine if you’re being too risk averse.

Also, simply calculating how much you need to save for the retirement you want—using tools like T. Rowe Price’s Retirement Income Planner—can help you make plans and feel more secure.

The 10-minute exercise can have a powerful payoff: The Employee Benefit Research Institute regularly finds in its annual Retirement Confidence Index that people who even do a quick estimate have a much better handle on how much they need to save and are more confident about their money situation. Also, according to research by Georgetown University econ professor Annamaria Lusardi, who is also academic director of the university’s Global Financial Literacy Excellence Center, people who plan for retirement end up with three times the amount of wealth as non-planners.

Says Murphy, “We need to let women in on the secret that investing isn’t that hard.”

More from Money.com’s Ultimate Guide to Retirement:

MONEY Financial Planning

10 Days to Total Financial Fitness

Bench press with gold painted weights
Gregory Reid

Presenting MONEY's 10-day program designed to pump up your finances for 2015. 

When you think about what kind of shape your finances are in nowadays, you may be feeling downright buff. Retirement plan balances are at record highs, home prices are back to pre-recession levels in most parts of the U.S., and the job market is the strongest it’s been since 2006.

No wonder Americans are more optimistic about their finances.

Given that, it’s understandable that some bad habits may be creeping back into your routine. Americans, overall, are slipping into a few: Household debt is at a record high, fueled by an uptick in borrowing for cars and college and more credit card spending. Vanguard reports that investors are taking risks last seen in the pre-crash years of 1999 and 2007.

What’s more, the financial regimen that’s been working well for you of late may not cut it anymore. In this slow-growth, low-interest-rate environment, both stock and bond returns are expected to be below average for several years to come.

To pump up your finances in 2015, you need to shake up your routine. The plan that follows can help you do just that. Every day for the next two weeks, we’ll target-train you for a different financial strength. This program includes seven quick workouts, inspired by the popular exercise plan that takes just seven minutes a day, that will push you to raise your game in no time at all. What are you waiting for?

See What Shape You’re In

Even if you’re a dedicated exerciser, you could be ignoring whole muscle groups, leaving yourself susceptible to injury. For example, 39% of people earning more than $75,000 a year wouldn’t be able to cover a $1,000 unexpected expense from savings, according to a 2014 Bankrate survey. So the first step is to establish your baseline by asking yourself these questions.

How are my vital signs? Tick off the basics: Check your credit, tally up your emergency fund (aim for six months of living expenses), look at how much you are contributing to your retirement plans, and get a handle on how you’re splitting up your savings between stocks and bonds.

Less than half of workers have tried to calculate how much money they’ll need for retirement, EBRI’s 2014 Retirement Confidence Survey found. Take five minutes to use an online tool that will show you if you’re on track, such as the T. Rowe Price Retirement Income Calculator.

What’s my day-to-day routine? The very first thing Rochester, N.Y., CPA David Young does with his clients is go over their spending. Budgeting apps, he notes, “make the invisible credit card charges visible.” As important as the “how much” is the “on what,” says Fred Taylor, president of Northstar Investment Advisors in Denver. Divide your expenses into the essential costs of living, investments in your future (savings, education, a home), and the discretionary spending you have the flexibility to cut.

Am I juicing my finances too much? In other words, how toxic is your borrowing? Your total debt matters. But the kinds of debts you have and the implications for your future are crucial too, says Charles Farrell, author of Your Money Ratios and CEO of Northstar. As a young saver, you shouldn’t be worried about high debts due to a house and education, Farrell says, as long as you can handle the payment, will be debt-free by your sixties, and are using debt only to fund investments in a low-cost or high-earning future, such as a low-maintenance home or new job skills. Farrell suggests in your twenties and thirties you should limit total mortgage debt to less than twice your family income. In your fifties, you should have a mortgage no higher than what you make. At any age, total education debt should not exceed 75% of your pay.

What’s my biggest weak spot? You need to guard against familiar risks, like insufficient insurance. But David Blanchett, head of retirement research for Morning-star, says you should also think about less obvious threats. Will new technology put your livelihood at risk? Are you counting on a pension from a financially shaky firm? Do you live in an area, such as Northern California, where home values hinge on the success of one industry?

Once you know how much progress you’ve made so far and what areas need the most work, you’re ready to get going on your financial fitness plan.

Next:

MONEY Aging

Pop Goes the Age Discrimination Bubble

senior man blowing bubble out of gum
Getty Images

Age discrimination charges have returned to pre-recession levels—another sign we're getting back to normal

The popular narrative holds that age discrimination is off the charts and employers can’t shed workers past 50 quickly enough. Yet age-related complaints filed with the federal government fell for the sixth consecutive year in 2014, and the percentage of cases found to be reasonable have been trending lower for two decades.

Certainly, there remains cause for concern. The 20,588 charges filed under the Age Discrimination in Employment Act are higher than in any year before the recession. But the number is down from 21,396 in 2013 and from a peak of 24,582 in 2008, according to new data from the Equal Employment Opportunity Commission.

Meanwhile, the EEOC found reasonable cause in only 2.7% of the cases filed. That is up from 2.4% in 2013 but otherwise the lowest rate since at least 1997. Monetary awards hit a five-year low of $78 million.

Just about everyone past 50 knows someone who believes they were discriminated against in the workplace because of their age. In a 2012 survey, AARP found that 77% of Americans between 45 and 54 said employees face age discrimination. Clearly, in many cases older workers command higher wages. Organizations can cut costs and make room for younger workers by moving older workers out—even though doing so on the basis of age is against the law.

This helps explain the rise in age discrimination charges during and since the recession, when companies undertook vast reorganizations and laid off millions of workers to cut costs and adjust to the slow economy. Older workers who lost their job have had a difficult time finding employment, further driving them to seek relief wherever possible.

Now age-related charges in the workplace are roughly at pre-recession levels. Charges ranged between 16,008 and 19,124 from 2000 through 2007. Returning to near this level is the latest sign—along with more jobs and rising wages—that the economy is getting back to normal.

Age discrimination is a serious issue. It is more difficult to prove than discrimination based on race, sex, religion, or disability. It also takes a heavier toll than other forms of discrimination on the health of victims, research shows. Boomers who want to stay at work typically need the income or the health insurance that comes with full-time employment. Turning them away places a greater burden on public resources.

Meanwhile, older workers have a lot to offer, including institutional knowledge, experience, and reliability. Some forward-thinking organizations including the National Institutes of Health, Stanley Consultants, and Michelin North America, among many others, embrace a seasoned workforce and have programs designed to attract and keep workers past 50.

None of this is to say age discrimination is no longer a problem. One alarming aspect of the EEOC state data is that warm climates popular with older people have a high rate of age-discrimination complaints. No state had a higher percentage of EEOC age-related complaints last year than Texas (9.2%). Florida had 8.5% of all cases and Arizona had 3%.

Federal officials note that the government shutdown last year contributed to a falloff in cases filed. So official complaints may be understated last year. And an overwhelming number of age-related sleights at the office never get reported. Still, the bubble in recession-related age discrimination cases appears to have been popped. That’s a start.

MONEY Social Security

Why a Better Job Market Can Mean a Social Security Bonus

Getting back to work for even a few years before you retire can make a big difference to your income.

More Americans over 55 are finally getting back to work after the long recession. The strong national employment report for January released last week confirmed that. The unemployment rate for those over 55 was just 4.1% in January, down from 4.5% a year ago and well below the national jobless rate. The 55-plus labor force participation rate inched up to 40% from 39.9%.

That is good news for patching up household balance sheets damaged by years of lost employment and savings, and also for boosting future Social Security benefits.

Social Security is a benefit you earn through work and payroll tax contributions. One widely known way to boost your monthly benefit amount is to work longer and delay your claiming date. But simply getting back into the job market can help.

Your Social Security benefit is calculated using a little-understood formula called the primary insurance amount (PIA). The PIA is determined by averaging together the 35 highest-earning years of your career. Those lifetime earnings are then wage-indexed to make them comparable with what workers are earning in the year you turn 60, using a formula called average indexed monthly earnings (AIME); finally, a progressivity formula is applied that returns greater amounts to lower-income workers (called “bend points”).

But what if you are getting close to retirement age and have less than 35 years of earnings due to joblessness during the recession?

The Social Security Administration still calculates your best 35 years. It just means that five of those years will be zeros, reducing the average wage used to calculate your PIA.

By going back to work in any capacity, you start to replace those zeros with years of earnings. That helps bring your average wage figure up a bit, even if you are earning less than in your last job, or working part time.

“Any earnings you have in a given year have the opportunity to go into your high 35,” notes Stephen C. Goss, Social Security’s chief actuary.

I ran the numbers for a an average worker (2014 income: $49,000) born in 1953, comparing PIA levels following 40 years of full employment with the benefit level assuming a layoff in 2009. The fully employed worker enters retirement at age 66 (the full retirement age) with an annual PIA of $20,148; the laid-off worker’s PIA is reduced by $924 (4.6%). Getting back into the labor force in 2014, and working through 2015, would restore $720 of that loss.

That might not sound like much, but it would total nearly $25,000 in lifetime Social Security benefits for a female worker who lives to age 88, assuming a 3% annual rate of inflation. And for higher income workers, the differences would be greater.

You also can continue “backfilling” your earnings if you work past 60, Goss notes. “You get credit all the way along the way. If you happen to work up to age 70 or even beyond, we recalculate your benefit if you have had more earnings.”

The timing of your filing also is critical. You’re eligible to file for a retirement benefit as early as age 62, but that would reduce your PIA 25 percent, a cut that would persist for the rest of your life. Waiting until after full retirement age allows you to earn delayed filing credits, which works out to 8% for each 12-month period you delay. Waiting one extra year beyond normal retirement age would get you 108% of your PIA; delaying a second year would get you 116%, and so on. You can earn those credits up until the year when you turn 70, and you also will receive any cost-of-living adjustment awarded during the intervening years when you finally file.

Getting back to work will be a tonic for many older Americans, but what they might not realize is that it is also a great path to filling their retirement gap with more robust Social Security checks.

Your browser is out of date. Please update your browser at http://update.microsoft.com